– Oil-price gouging – specifically, whether the US needs a new federal law that would prohibit such profiteering – has emerged as one of the most controversial aspects of the energy legislation the Senate is considering this week.
Many Democrats think price gouging should be a federal crime. They've included a provision in the energy bill that would make it illegal to reap "excessive" profits at the pump in times of a national energy emergency.
But the White House says the proposed new law is so vague that it's unenforceable – and that antigouging efforts are really backdoor price controls. President Bush will veto the broad energy bill if it contains the provision, according to administration officials.
"The federal government has all the legal tools necessary to address price gouging," said the White House last week in a statement on the issue.
Price gouging has long been a hot topic in Congress when prices at the pump spiral up. The latest push for a new US law dealing with the subject began in 2005, after hurricane Katrina was followed by sharp gas-price increases all across America.
The Democratic takeover of Congress allowed longtime proponents of the measures, such as Sen. Maria Cantwell (D) of Washington and Rep. Bart Stupak (D) of Michigan, to finally push them for consideration on their respective legislative floors.
The House passed a stand-alone price-gouging protection act in May. It directs the Federal Trade Commission and the Justice Department to pursue complaints of profiteering or any activity that indicates an oil seller "is taking unfair advantage" of unusual market conditions.
Senate bill limited to emergencies
The Senate provision is similar. It would not be triggered unless the president declares a national energy emergency, however.
At a hearing earlier this year, Representative Stupak, a chairman of a House energy subcommittee, said "this year's run-up in gas prices has not been the result of crude oil prices but some other factor or factors."
The fact that fewer and fewer firms control US refining capacity might be one reason, said Stupak.
"The number of companies owning refineries is less than one-third what it was [in 1981]," he said.
Some 29 states already have their own price-gouging laws. In May, Attorney General Greg Stumbo of Kentucky filed suit against Marathon Oil, accusing it of overcharging state consumers by more than $89 million after hurricanes Katrina and Rita tore through the nation's midsection in 2005.
But in general the state statutes have produced nothing but an occasional citation against an individual retailer, says Ben Lieberman, an energy expert at the Heritage Foundation.
On the national level, the Federal Trade Commission (FTC) investigated the post-Katrina price surge and found it was largely the result of supply shortages caused by damage to refineries, says Mr. Lieberman.
"There have been many investigations, and time and time again the industry has been exonerated," he says.
The FTC itself is opposed to the existing efforts to ban price gouging at the federal level.
Critics say language too ambiguous
At a recent congressional hearing, FTC commissioner William Kovacic said the ambiguous definition of harm contained in the House and Senate bills – "unconscionably excessive profits" – would make for difficult enforcement decisions.
In addition, the penalty for those found guilty might be up to 10 years in prison under the new laws, pointed out Commissioner Kovacic. That tough stricture, plus the law's vague language, might result in oil firms shutting down supplies in an emergency – lest they be charged with profiteering if prices spiked for normal economic reasons.
"My intuition is that it would create hesitation in the response to shortages and that that might tend to exacerbate rather than mitigate shortages," Kovacic told Congress.
In the Senate, this week is crucial for the energy bill as a whole. On June 19, the Senate Finance Committee is expected to approve a package of tax incentives for the legislation that would take $15 billion in tax breaks from large oil companies and steer it toward clean, renewable energy sources such as wind and solar power.
Disputes over auto fuel economy, requirements for utilities to use more renewable energy sources, and efforts to develop the use of coal as a motor fuel could still stall the broad legislation. All these issues have been the subject of intense lobbying by automakers, utilities, and other affected industries.
Given the stakes inherent in the legislation, it is too bad that the price-gouging provision has raised the prospect of a White House veto pen, says Pietro Nivola, a governance expert at the Brookings Institution in Washington.
In essence, the other things in the bill may be more important, he says.
"Profiteering does happen," he says. "But it is a footnote to the larger story."